Building construction and operation accounts for 38 per cent of global greenhouse gas emissions, with operational emissions (energy consumed to heat, cool, and light buildings) accounting for 28 per cent. About 11 per cent is generated from embodied carbon emissions that are associated with materials and construction procedures throughout the course of a building’s existence.
While many different technologies are available to aid in decarbonising the industry, additional investment is urgently needed to scale these solutions up in cities throughout the world.
The International Energy Agency (IEA) forecasts that direct building CO2 emissions need to decline by 50 per cent by 2030 and indirect building sector emissions by 60 per cent by 2050 to reach net-zero carbon building stock by 2050. This translates to a 6 per cent reduction in building sector CO2 emissions every year through 2030.
The transition to mainstream net zero carbon standards warrants urgent action to increase awareness, improve processes for calculating, tracking, and reporting embodied carbon, obtain voluntary reduction targets from industry, and implement new legislation at the local, national, and regional levels.
World Economic Forum’s report titled “Accelerating the Decarbonization of Buildings: The Net-Zero Carbon Cities Building Value Framework” discusses guidelines that will promote a more holistic decision-making strategy that considers social and environmental impacts as well as system performance. It includes a full description of both financial and non-financial value outcomes, as well as a checklist to assist asset owners and investors in making future-proof decarbonization investments.
The World Economic Forum’s Net-Zero Carbon Cities programme aims to accelerate the transformation of urban ecosystems towards a more sustainable, resilient and equitable future through integrated solutions that address energy, buildings and mobility. If the world is to keep pace with limiting the global temperature rise to below 1.5ºC compared to pre-industrial levels, a transition to a clean electrified world is needed. Buildings account for up to 38% of global carbon emissions. Reducing emissions in the urban built environment will therefore be a critical strategy to meet this challenge, and more investment is needed in relevant solutions, ranging from electrification to energy efficiency, from more digitalisation to better weatherisation.
The Net-Zero Carbon Cities Building Value Framework seeks to accelerate this transformation of the urban built environment by elevating the tangential benefits that are often qualitative in nature and helping correlate these with the return on investment in green buildings. This approach proposes that integrating the holistic value of investments in the decision-making process could increase capital flows towards decarbonising projects and solutions. This framework and its accompanying recommendations are presented as tools that asset owners and investors from the public and private sectors can use in capital investment decisions.
The role of buildings in combatting climate change
Cities are the frontline in lowering global carbon emissions. Over half of the world’s population live in cities, accounting for over 70% of CO2 emissions. Buildings are the largest contributor to emissions in cities, responsible for 50-70% of city emissions and 38% of global emissions. Roughly 75% of building emissions are operational emissions generated from building systems (e.g. heating, ventilation and air conditioning, lighting and IT servers). The remaining 25% come in the form of embodied emissions – carbon generated from the manufacture of building materials, construction and internal furnishings.3 As the world strives towards a net-zero economy, all buildings must become net zero by design.
The steps needed to deliver this outcome are outlined in the Green Building Principles: The Action Plan for NetZero Carbon Buildings. Due to the relative lack of net zero buildings in existence (fewer than 1% of buildings worldwide are net-zero),4 adopting scalable solutions to transform urban building stock is urgently needed. The current pace of economic growth and population rise in emerging economies will lead to a doubling of global building floorspace from new construction over the next 40 years.5 Net zero by design is not limited to new construction, as 80% of all buildings that will exist in 2050 already exist today.6 Retrofit and refurbishment projects are critical in the movement to decarbonise.
In Europe, between 1-1.5% of all building stock is being renovated every year. However, to meet the goals of the Paris Agreement, the rate of renovation needs to reach 2-5% a year.7 Net-zero buildings are an essential tool in achieving global emissions goals. In addition, as energy systems evolve towards net zero, buildings will play a larger role in the energy system. Matching electricity supply to demand is a balancing act and buildings can host new distributed resources, store power and optimise demand to help strike this balance.
The Building Value Framework
Although traditional financial outcomes have historically driven investment decisions in the building ecosystem, many industry leaders are increasingly recognizing non-financial considerations8 and are often including outcomes such as environmental and social impacts in building construction, valuation and acquisition decisions. However, the World Green Building Council’s recent Beyond the Business Case report has found that three of the top five most substantial obstacles to investment in sustainable buildings still relate to financing, with 53% of respondents citing higher upfront costs, either real or perceived, as the biggest barrier.
The Building Value Framework helps tackle this barrier by contextualizing the value of sustainable buildings to include environmental and social benefits, as well as improvements to system performance. It aims to accelerate decarbonization investments by changing the perception of the holistic value and benefit of those investments for key decision-makers across the building life cycle. The framework guides decision-makers to link these holistic performance outcomes to a reduction in risk or an increase in return on investment. For instance, increased user satisfaction in a green building may link to lower risks of vacancy and higher rents by attracting tenants willing to pay for higher standards.
The above framework was used to evaluate the value of several real-life examples. Three key insights emerged to maximize value creation are presented below:
Invest in decarbonization
Technologies and bundle for impact Technologies such as heat pumps, distributed renewable electricity and storage can have a greater aggregate impact on emissions reduction when implemented together rather than individually. For example, distributed energy generation is more impactful when combined with storage than when deployed alone.
Invest in digital
Buildings that are equipped to operationalize data (such as that for energy use and emissions) and connect systems within a building to enable smart optimization will be more future-proof. Digital and data fluency will amplify the impact of low-carbon technology interventions through enhanced operational decision support or automatic controls of building management systems. The use of digital twins can improve decision modelling and efficiency during construction, operation and maintenance.
Invest in city ecosystem services
Buildings can be a cornerstone of transport and energy decarbonization by providing services to the broader city ecosystem. Those buildings equipped with distributed renewable generation, storage and smart energy management solutions can contribute demand or frequency response services that accelerate city-wide decarbonization by offering solutions that do not require disruptive grid upgrades. Co-siting smart charging for electric vehicles with multi residence or commercial buildings can provide grid services as well as contribute to the decarbonization of individual vehicle transportation.
Practical application of the framework
The framework can evaluate both the new construction and retrofit of existing buildings. It is also intended to be universally applicable for different types of asset owners across different asset categories and building types. This flexible approach can be adapted to different contexts to spotlight the most important outcomes in each project. For instance, a social housing agency may prioritize “user satisfaction” and “socio-economic improvement”, whereas a commercial building owner may choose to focus on “systemic value efficiency” to create additional revenue streams from grid services. The three key insight areas derived from the project case studies present approaches to maximize project value creation.
The operational checklist shown in Figure 2 serves as a basis to help identify relevant options at the time of any investment planning. These nine operational points can assist asset owners to and investors to practically achieve the key insights, especially those focusing on reducing operational emissions. The selection of investments (singular or bundled) may of course vary according to building type or asset owner profile.This checklist is meant to be applied across all building asset types at any stage of the investment planning and decarbonization journey.
The full report can be accessed here.